Annual Report 2001 - HUGO BOSS AG

54 | The Year 2001
Exchange rates had almost no impact on the gross margin: the relevant currency values
barely changed during the course of the year.
Operating expenses up sharply
Operating expenses including depreciation rose by a total of 88 million EUR or 28% in
the year under review. The main activities generating this surge were:
–Higher marketing outlays. These rose by 19 million EUR to 85 million EUR. Of the total
marketing budget, 10 million EUR was spent on BOSS Woman, a rise of 8 million EUR
compared to the previous year. The budgets for the other brands were increased by
11 million EUR or 17%, in line with sales.
–A 20 million EUR increase in other expenses for the operational functions – creation,
logistics and marketing – at BOSS Woman.
– Additional outlays of 19 million EUR for the company’s own retail operations, primarily
in the U.S., but also in Italy and France.
– Increased production costs, above all at the Izmir plant (8 million EUR); these were,
however, more than offset by appreciably higher savings in the gross margin.
The remaining additional expenditures of 22 million EUR went largely toward expanding
the Group’s logistics, sales and marketing structures. These adjustments are designed
to equip the Group for future growth in sales and earnings and to optimize processes.
Operating result at previous year’s level
At 87 million EUR and 88 million EUR respectively, the 2001 rises in the gross margin
and operating expenses were roughly equal; as a consequence, the operating income of
162 million EUR only changed marginally from the 2000 figure. The section “Segmental
Reporting” explains in detail how the deficits in the women’s operations were effectively
cancelled out by substantially increased operating income from the menswear
activities.
High extraordinary items
Considerable non-recurring and extraordinary expenditures totaling 16 million EUR
arose in conjunction with the BOSS Woman operations during the year under review.
The capitalized pre-operating expenses from 1999 and 2000 have been systematically
written off since October 2000. In 2001 this ran to costs of 3 million EUR. The remaining
13 million EUR from the extraordinary items are traceable chiefly to reserves for restructuring
in Milan.
In the Group’s menswear operations, a tax audit led to the post-capitalization of assets
and hence to non-recurring revenues of 4 million EUR. Apart from this, there were no
appreciable extraordinary items.
Given the special dividend payment and higher current assets in the first half of 2001,
the Group’s financing requirements increased, producing a 4 million EUR rise in interest
charges. This rise and the higher extraordinary expenses were the main reasons for the
lower pre-tax result, which decreased from 163 million EUR to 149 million EUR.
Lighter tax burden
The lower pre-tax result is one reason for the Group’s lighter tax burden in 2001. It was
responsible for 5 million EUR of the 22 million EUR reduction. The tax reform enacted in
Germany – which reduced the corporate tax rate in 2001 – proved another factor, lessening
the burden by a further 8 million EUR.
During 2000, the Group had posted major cost items which did not, however, have a
diminishing effect on taxes. These items included the pre-operating expenses for the
BOSS Woman line and the opening of the Izmir production plant, and acted to increase
the average tax load ratio. In 2001 by contrast, there were no non-deductible expenses.
The Group benefited to a limited extent from losses carried forward that produced a further
reduction in tax payments.
DVFA result up 14 %
The Year 2001 | 55
The DVFA result is principally based on the International Accounting Standards (IAS).
Beyond the tax effect of the 2000 special dividend, the greatest divergence between the
application of IAS versus the German Commercial Code (HGB) in 2000 and 2001 is attributable
to the capitalized pre-operating expenses.
IAS does not provide for the capitalization of such expenses. For this reason, the amounts
capitalized the previous year have been adjusted – with a negative effect on results
((5) million EUR) – whereas the subsequent depreciation in 2001 has had a positive
impact (3 million EUR).
At (1) million EUR, the netted difference between IAS and HGB evaluation in 2001 was
ultimately minor, because the more sizable differential amounts largely balanced out.